Fonterra eased concerns over ideas of waning Chinese orders
blamed for a retreat in world dairy prices, saying "demand still appears strong",
and will continue to outpace the rise in domestic milk production.
The New Zealand dairy giant, the world's top milk exporter, acknowledged
that China's milk production "has shown signs of recovery" in the first three
months of 2014, following market talk of an increase of about 5%.
However, demand by China, the top importer, is growing even
faster Fonterra said, quoting Rabobank estimates that the country has a
production deficit of 10bn litres, and growing.
"It is clear the supply gap is widening, which could open
the door for more imports," the co-operative said.
'Imports have surged'
"Dairy imports into China have surged in the past six
months," Fonterra said, pegging volumes at nearly 2m tonnes, equivalent to
about 16% of global imports.
"Growth in imports of dairy products into China were up 39%
for the 12 months through to February 2014."
In Russia too, in which US Department of Agriculture staff
issued some relatively cautious import forecasts last week, "demand still
The two countries between them account for some 27% of world
dairy imports, up from 6% in 2008, with milk powder driving Chinese orders, and
cheese behind the jump in Russia's volumes.
Overall world dairy trade, as measure by exports, rose by 3%
to 14.2m tonnes in the year to February.
'More milk available'
The comments came as Fonterra, which processes the vast
majority of New Zealand's milk, revealed an 8.3% rise to 1.58bn kilogrammes of
milk solids in its volumes for 2013-14, which for the season ended on May 31 in
North Island led the increase, with an 8.9% rise, while
South Island collections rose by 7.3%.
The co-operative revealed further recovery in volumes at its
smaller Australian operations too, with a 12.6% rise in April collections
lowering to 1.7% the decline in the first 11 months of 2013-14, which in
Australia ends this month.
With output rising strongly in the European Union too, by
5.8% in the first three months of 2014, "there is currently more milk available
for the international market to absorb," Fonterra said.
However, US production growth, at 1%, is behind official
And, in South America, the co-operative also highlighted a
slowdown in Uruguayan milk production "due to challenging climatic conditions",
while output remained flat in Argentina, which "faces a range of challenges
including a weakening currency, higher manufacturing costs and a lower milk
Prices at GlobalDairyTrade, the twice-monthly dairy auctions
run by Fonterra, have fallen by some 25% since early February.